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J2 Global Communications Inc (NASDAQ:JCOM)

Digital Media Day Conference

July 09, 2013 3:00 pm ET

Executives

Robert Scott Turicchi - President

Vivek Shah - Chief Executive Officer

Andy Johns - Chief Financial Officer

Laura Hinson

Analysts

Shyam Patil - Wedbush Securities Inc., Research Division

Daniel H. Ives - FBR Capital Markets & Co., Research Division

Gregory Burns - Sidoti & Company, LLC

Jeffrey Alan Walkenhorst - Copeland Capital Management, LLC

Brad Walker

Robert Scott Turicchi

Good afternoon, everyone. If we could ask you in the back to please take a seat. We're going to get started in a couple of minutes. Thank you.

Good afternoon, and welcome to j2 Global's Digital Media Day. I'm Scott Turicchi, the President of j2 Global. And we're going to use this opportunity to introduce you to some members of the management team of Ziff Davis, an entity we acquired back in November of 2012, discuss the business strategy, the brands and the business model.

However, before we begin, as you're all aware, this is being webcast today. We have to go through the forward-looking statements, Safe Harbor and the risk factors, any of which we'd be happy to address during the Q&A session.

Before turning the podium over to Vivek to talk in depth about the Media business, I want to spend just a couple of minutes to set the stage on j2 Global, Inc. The slide you see behind me separates our company into 2 segments, which is also how we financially report. On your left-hand side is the Cloud business, beginning with the digital fax services that our -- were our original foreway into Cloud all the way back in 1996. That led to the emergence of a variety of voice solutions, primarily branded eVoice and Onebox, and then more recently, a series of nontelephony-oriented cloud services that are generally grouped under email and CRM and backup. As of the end of Q1, you'll see the approximate relative percentages of j2's total Q1 revenue that fell into each respective category. Then as I mentioned in November of last year, we bought Ziff Davis. Subsequent to that in February of this year, we bought IGN, and more recently in May, NetShelter. However, remember, only 2 months of IGN financials are included in Q1 and none of NetShelter. And so as a result, you only see Media representing approximately 20% of Q1 revenue.

Now a lot of people asked me at the time we acquired Ziff, "Why Ziff? Why digital publishing? Why not additional cloud services?" Although we've articulated this I think in a couple of the earnings presentation subsequent to acquiring Ziff, I thought it would be helpful to review our entrée into the digital media space. It starts really with what we at j2 and the management side look at as our core competencies. As you know, from the Cloud business, we run these for margins and cash flow that are oftentimes disproportionate to what others -- what some might deem to be competitors in our space. That's driven in large part by the financial discipline that we impose, particularly the area of sales and marketing. Our decisions are made primarily based on the return on investment. We look for the ability to add additional properties to any space we are in through our M&A program and to acquire and own strong brands, which in the case of the Cloud business, will give you customer acquisition without direct marketing costs and the media side of the business, traffic without having to pay for it. So we look at those as the value that j2 can bring to the table, as well as, of course, its attractive free cash flow leveragability and bank accounts.

We get solicited oftentimes because we are very deal-active to look at other spaces beyond the current cloud services that we currently offer. The vast majority at that time was other ideas are quickly rejected because they don't meet a number of the criteria that we demand to move forward. First and foremost, we want to see a healthy robust market. At the bottom of this slide and Vivek will go through a much greater detail in the area of display advertising broadly defined, you see strong double-digit growth rates both historically, as well as projected over the next several years. So it meets the space criteria of large and growing. We also like where the technology and the vision of the management team is in someway disruptive to what others are doing in the space. Certainly, the way we run our modeling cloud is not the typical way that many other organizations run it, chasing primarily high top line growth rates, but sometimes at the expense of bottom line profit.

The fragmentation of the space is also important to us. Although that might lend the question, "Isn't it highly competitive?" We actually look at it on the inverse side. This provides additional opportunity to rolling properties, synergize them within our own platform and management team to achieve our financial objectives. However, even a space that has all of those criterias, that is not sufficient to invest our capital. Two other things are needed. You need technology that is differentiated and you need a strong management team to execute against that vision and that plan. And that's what we found when we bought Ziff Davis.

I'm going to introduce Vivek. He'll introduce some other members of his team who are with us today, but as we were doing due diligence, one of the things that impressed us was his own tenure at timing, where he had risen to the ranks of group President digital for business, sports and news, as well as the President of Fortune and Money magazines. He had seen what has gone on in time with content being produced primarily for traditional publishing and how that transition can be made into the digital world and to establish a business model that is both profitable, as well as superior in its margin structure relative to other competitors. More importantly though, he had led the acquisition of Ziff Davis out of bankruptcy approximately 3 years ago in June of 2010. And as you've seen from our previous financial presentations of Q4 and Q1 of this year, the turnaround was nothing short of spectacular. So those elements combined with a heavy emphasis on the last piece being the management and their technology drove us to the conclusion that this was a space worthy of j2's capital and investment. And as you know, subsequent to buying Ziff, we've done 2 follow-on acquisitions that have now created a legitimate presence in the tech, gaming and men's lifestyle space.

And at this point, I'd like to turn the presentation over to Vivek. One housekeeping note, which I failed to mention, is you will hear the closing bell at 3:59 so don't be alarmed by that. And secondly, all financial information is as of the end of Q1 as we are about 3.5 weeks away from reporting Q2. So this is more to give you an overview of the business division and the strategy, not in any way to dive into Q2 results. V?

Vivek Shah

Thank you, Scott. Good afternoon, everyone. It's great to be here. We have got a lot of ground to cover so we'll start with just the industry overview, what's happening in the media space, some key themes and trends that we're seeing and implications for operators within the media industry. We'll talk about the status. We'll talk about the company, our core assets, our capabilities and our business model. And then we'll really spend the bulk of our time on 10 key investment highlights. These are the 10 things that if you're going to study our company, you really ought to know and then we'll have plenty of time for questions and answers. I'll be up here taking questions. Scott will join me. I want to introduce 2 of my colleagues in the front row, Andy Johns, who's our CFO; and Steve Horowitz, who's our COO.

So this is probably the least surprising side in our presentation. What this shows is the average time spent by U.S. adults across all media. The first thing you'll see is that from 2009 to 2012, media consumption across all forms has grown 12%. So on average, a U.S. adult spends 11 hours a day consuming media. If not necessarily 11 additive hours, there's a lot of multitasking in here. So just imagine you're watching television and you're on your PC on the Internet, that time spent counts twice. So if you're watching for an hour of television and you're watching an hour of -- you're spending an hour on the Internet, that will count twice. What you'll also see here is that print is really now the smallest medium within the mix. So consumption with print, which is newspapers and magazines in their printed forms, has fallen 30% from 2009, not terribly surprising, I think, to anyone in this room. In fact, if you look at it over the last 10 years, the number of people who have read a print newspaper has dropped by 18 points from 41% to 23%. The number of people who had print -- who have read a print magazine yesterday has dropped from 23% to 17% so not terribly surprising. On the other hand, what you're seeing in the online and mobile space, which I'll just call digital, together is some significant growth. We've seen 52% growth in terms of usage minutes with both mobile and online driving that piece. In fact, in 2013, if you look at the trajectory, digital, mobile plus online should overtake television in terms of time spent. And that's a watershed moment really for the Digital Media business because that is a major breakthrough considering the dominance that television still plays within the media mix.

So what this slide does is essentially take the time spent metrics that we just saw and matches it against the ad spend. So you can get a sense of how certain media perform from a consumer consumption point of view and how that compares with where advertisers are allocating their budget. So what you'll see is that in 2008, print had 11% of time spent, but a pretty astonishing 35% of the media pie, right? So we've got essentially 3x what it really ought to have got if the market were efficient. If you fast forward to 2012, print is almost halved in terms of time spent, again consistent with what we saw on the previous slide. But ad spend is also down, still not down to the level that matches time spent. But I think the general thinking within the industry is that these markets are efficient like most markets and that over time, you're going to see print ad spend really match time spent. On the other side, you look at mobile and you look at online from a mobile time spent point of view more than double, and now you're beginning to see ad spend at 3% of the overall ad pie in the United States being allocated to mobile. And on the online side, still a pretty strong portion of, time spent from 23% to 26% and budgets moving from 15% to 22%. So the general wisdom within the market space is this, that mobile and online ad spend will catch up to time spent, that print ad spend will decline to match time spent. And when that happens, you have a $20 billion opportunity within the U.S. digital advertising market, which today is around $40 billion.

And that's sort of what this slide supports, right? This is the 2011 to 2016 growth rates in the United States for online advertising and for mobile advertising. Online will grow at a 14.6% compounded annual growth rate from this year of $32 billion, $33 billion to $40 billion in 2016. And on the mobile side, you'll see a 52% growth rate, obviously a smaller base, but growing to close to $12 billion in advertising in the United States in 2016. So by 2016, you're talking about a U.S. total addressable market of $52 billion. That still would under-index it against time spent because it still represents only 27.5% of the overall advertising marketplace in the United States. If you were to match to where time spent is, it's probably another $10 billion on top of this. So call it a $62 billion to $65 billion U.S. Internet advertising marketplace.

So apart from consumer consumption and sort of dynamics in the ad market from a share point of view, there are other differences between print and digital. So one is around scale and fragmentation. So if you look at the number of properties in the United States today that have over 1 million readers, on the print side, newspapers and magazines, you have 83 newspapers and magazines that have a million or more readers. You look on the Internet side and you have close to 2,000.

So 3 primary reasons for that. Number one is that digital is very accessible. I mean it is pretty much at your fingertips. Everybody in this room is staring at least at 1 to 2, possibly 3 screens. It's right there. It's for you to access. It's always on. Print still requires payment. Most print products are subscription or single copy-based. And in the digital space, for the most part, content is free. And then I think the last distinction has to do with what is the sort of the dynamism of the Internet space. On the print side, it's content. 100% of what those 83 titles use content. On the Internet side, about 40% of these 2,000 websites are content sites. The other 60% aren't actually content sites, right? They are communication sites, where you do email and instant messaging. They're community sites: Facebook, Twitter. And they're commerce sites: Amazon and eBay. All of those carry advertising. So it is a different dynamic. You have a broader set of competitors within the space.

The implication that we see here is that advertisers cannot transact with all 2,000 of these entities directly. It's just too hard. The transaction costs are too hard. The friction is there. They are looking for players who can bring some form of consolidated approach, whether it's multiple vertical, multiple properties, some sort of representation layer to the equation. So when we talk more about Ziff, you'll see that as a hallmark part of our strategy, which is to bring a higher level of scale to solve what is fundamentally a problem for advertisers, which are these 2,000 web properties over 1 million users a month.

The publishing formulas are also very different and I think it's worth spending just a minute talking about those differences. So on the print side of the equation, you're really talking about text and images, right? The content is confined to just that. It's a finite bundle, right? So it's a fairly fixed book size, as we would call it. That was really the same product that everyone would receive. It's not you have some levels of customization and personalization in newspapers and magazines, but for the most part, everybody gets the same thing. It's sent to a printer. That's still how it's done and trucks go from the printer to deliver at newsstands, go to deliver at homes and places of business. So that's the print model.

On the digital side, obviously far more in the way of content. So you have texts. You have images. You have video. You have slideshows. You have polls. You have live streams. All forms of interactive elements. You have extensively an unlimited range of content. You're not confined to 140-page book size or certain number of printed pages that you're managing in the print business, which allows you to offer lots of bits of content to different audiences with different expectations and needs. And again, it's on all 3 screens and all 3 screens are with us all the time. So the immediate access is real. And so the advantages: richer content, just a deeper experience, wider reach, immediate delivery, right? I think we're in a world where we expect immediate. It's interactive. You can post. You can comment. You can share. It's accessible and it's always current. And I think that's a very critical part of the equation.

And you see in this slide the manifestations of that. Print's being left behind. So if you look at the top 50 Internet companies measured by comScore from a monthly unique visitors' point of view, and we'll talk about comScore and monthly unique visitors as a metric in a minute, if you look at that, only 6 of the top 50 companies today -- Internet companies today have their origins in print. We're one of those 6. You'll also see that this whole "analog dollars to digital dimes" problem is real. So you look at what's happening in the newspaper business and the digital ad gains are there, but they're being outweighed by print ad losses at a ratio of 10:1. It is an intensely negative sum equation. And it's a hard equation for them to work themselves out of. And then on the magazine side, across the consumer magazine industry in the United States, only 6% of its revenues are digital.

So what makes us different? We've clearly produced results and have created a company that has exceeded despite our print origins and I think there are 3 reasons for that. First is, we got out of the print business. So in 2008, we ceased all publication of printed magazine. And I think the benefit that we saw from that was focus and the ability to put all of the organizational energy, investment and time into focusing on the Digital Media business, where we saw an incredible amount of growth potential. I've lived personally where you try to do both and you do neither well. And I think being able to focus our company around digital content, around digital publishing was a huge benefit. I think the second piece of this and Scott alluded to it, we have strong brands. Brands have always mattered. Brands will always matter. And in the market spaces in which we operate, we have authoritative and trusted brands. And it impacts our relationship with the consumers. It impacts our relationship with advertisers. And we operate in really high-value verticals. And the high-value piece of vertical really is how marketers view these verticals, right? Marketers today aren't looking for general news consumers. They don't really have marketing value outside of aggregate reach. We're not in the aggregate reach business. There are a lot of entities in the world that can give you lots of just mass eyeballs. We're giving you a very coveted set of audiences, who are deeply passionate about technology, about games, about men's lifestyle issues, who are ready to transact, who are in market, who are really customers and I think that is a critical, critical difference. I'll go back and talk about each one of these verticals in more depth and each one of these brands.

But a minute about the model because the model is, it's easy. It's straightforward, but I think powerful and really differentiates us from the competition. So let's start with content. So we don't produce any content. We produce what we call end market content. This is content expressly designed to help people make a purchase decision, right? We'll talk more about what the purchase process looks like, what the 4 phases of that process and how we surround ourselves. But if you're buying a computer, if you're buying a phone, if you're buying a games console, if you're buying a games title, you're buying a car, you're buying a jacket, whatever it is that fits within the verticals in which we operate, we produce content to help inform those decisions. And that is different than a lot of other content publishers, who are expressly producing content to generate traffic and audience. Yes, we're generating traffic and audience, but I think it's the right traffic. And it's the right audience that has marketing value because they're audiences with intent, right? So we can tell by what you're reading, what you are searching, what you're clicking on, are you in market for various products and services which has the incredible marketing value, which allows us to extract multiple rents. So we have 4 ways of making money. We'll talk about all 4 of those in depth: display advertising, video advertising, affiliate marketing and licensing. So our ability to extract for rents puts us in -- distinguishes us from many in the digital media world to have 1 possibly 2 rents. And the reason we can extract for rents from audience and content is because of the nature of the content and because of the end market nature of the audience.

So these are the positioning highlights that we're going to cover. So the first one, we talked about this, our brands, they're market leaders. They are in great ad verticals. Number two, high-quality content. Our editorial approach we think is unique and a key value driver. Scott touched on this. Our traffic's 100% organic, which means we don't buy any traffic. It all comes to us for free. And I don't think there are many within the digital content space who can say that's certainly not of the scale of traffic and audience that we are. And the audience continues to grow at strong percentages. We are -- video is a big part of our content equation and where we see a significant amount of upside. Substantial mobile and tablet traffic growth, you saw how fast mobile is going from a consumption point of view and also from an advertising point of view, we're experiencing the same. And for us, mobile traffic is positive some to desktop. So desktop traffic is growing and mobile traffic is growing. So we're seeing growth in -- on all screens.

The great promise around digital advertising has always been addressability and targetability. And so the data management platform, which is a piece of technology that we have built, allows us to target advertising across all forms of advertising and deliver performance that advertisers are looking for. We've got a great business model, again, multiple rents, which is a hallmark of our approach. Strong position, we think very hard to match. Strong results, which we'll talk about and we think the best is yet to come. A lot of potential and a lot of growth opportunities.

So let's start with the first piece, which are the brands. So this is us in the tech vertical. So we're #1. We're #1 in monthly unique visitors as measured by comScore. So monthly unique visitors as a metric, a very common metric in the digital media space, that is the number of people you see every month no matter how many times you see them. So you come once, you count once. You come 10 times, you count once: unique visitors. So this is 28.9 million unique visitors in our tech vertical a month measured by comScore. comScore is a third-party audience measurement firm. I use comScore, encourage others to use comScore for the simple reason that it is the only benchmark-able source of unique visitor data. So we can compare ourselves to CNET and to AOL and to other competitors. You will find certain digital publishers who will produce their internal unique visitor number, their monthly unique visitor number. We don't look at that very closely because it has 2 flaws, not just for us but for everybody in the market space, which is if you come to a website from home and work, you count twice because there's no way to tell that you are the same person on 2 machines. So it's counting machines, not people. And if you delete your cookies, which happens a lot these days, you reset the count. So you'll see monthly unique visitor numbers that are larger than numbers like these even for our properties, but we choose not to use them because they have the cookie deletion homework duplication inflation and you can't really benchmark your numbers to somebody else's. So when we talk about monthly unique visitors throughout the presentation, they're from comScore, third-party, panel-based and census-based data.

Within the tech vertical, we operate 4 groups. So start with our reviews group. Our flagship brand within the tech vertical is PCMag. It's a 3-decade-old brand. It stands for lab-based evaluation and testing of products. We've been doing it for 30 years. No one does it better. We have a testing facility, a 6,000 square foot testing facility on 28th and Park. We test about 2,200 products and services within the tech space every year. We'll talk a little bit later about how -- when we give product awards, when we give product distinctions like Editor's Choice and 4 stars and 5 stars. It means a lot to the people who receive those. They compensate us separately from a licensing point of view, but it speaks to the power of the brand. And we are well beyond PCs. I get the question all the time, which is, "What do you do aiming beyond PCs? We do mobile, smartphones, tablets. We do software, PC-related products with a whole range of consumer technology and SMB technology products. In fact, our #1 area of traffic content consumption is around smartphones and not even PCs. What PCMag as a mark stands for, however, is really just trusted authoritative web-based reviews, and it's really the consumer reports of tech. It is viewed that way by pretty much of all the vendors within the space. We also have ComputerShopper within the review space.

That is very much focused on PCs and PC-related products.

The second group is our IT Professionals group, anchored by a property called Toolbox.com. So Toolbox.com is essentially a Q&A site. Highly technical questions from technology professionals get asked at this site. On average, within 16 minutes, a member of the Toolbox community provides an answer. It is a stunning turnaround time in terms of question-and-answer. What it also does is, not only provide the service of if you've got a question, a highly technical question, you'll get a highly technical answer. That document, that body of work, that Q&A thread is a highly indexed and available through people who are searching those similar questions on Google. So you may not come to Toolbox asking that question, you may go to Google, as many search journeys begin, and type in that question that will index very, very high. So it is a great resource for IT developers and professionals. We have some more niche sites and ERP and VoIP news and security in spaces like that.

On the blog side, really extreme technologic buying geeks, very much a focus on gadgets and very much a focus on deals and discounts and great coupon codes and that sort of thing within the tech space. It's into our affiliate marketing business, which we'll talk more about, but it's a very powerful part of the business. And then our NetShelter network, this was a recently acquired business, that, essentially, a network of 150 properties. We don't own and operate these properties. So the other properties I just talked about are all owned and operated Ziff Davis Inc. properties. NetShelter is a network of third-party small to medium publishers who rely on us for monetization. So the rent that we extract on our own traffic, on our own audience and our own content, we bring those same sets of services to those within the tech space. Tech and telecom, as an advertising category, is only second to retail on the Internet. So a very, very robust category.

Our second vertical, the games vertical, is anchored by 1 property, and that's IGN. And IGN features news and reviews on games, games consoles, movies and television shows. Of all of our brands, it is the most international brand. We have 14 versions of IGN across the globe, 12 different languages in 40 different countries. It's also the most social of our brands. It fits, I think, well, within its space and within the consumer behavior within the space, but close to 5 million social followers.

From a cloud point of view, some of you may be familiar with cloud, it's essentially a third-party measurement over social influence. We have the highest score that I've ever seen in cloud, which is 99 out of 100. The other 99 is the President of the United States. So from a social influence point of view, IGN is up there in some rarefied air. From a monthly unique visitors point of view, 12.4 million unique visitors per month within the United States. And just back to sort of the competitive set, the #2 player in technology with CNET, which is a CBS Interactive property, the #2 player within the game space is GameSpot, that is also a CBS Interactive property. So we are neck and neck within both of these verticals.

The third vertical is our men's lifestyle vertical. And this is -- it's a smaller vertical than the others, in terms of reach. AskMen.com, which is our core property within this space, which is 3.8 million monthly unique visitors per month in the United States. It's well ahead of some very established print originated brands, Men's Health, Esquire, GQ, Maxim. AskMen was truly the pioneer in this space, the first digital-only men's lifestyle brand to launch on the Internet about a decade or so ago. It's really well-positioned for us for categories of advertising that we don't see routinely in the other verticals, and that's luxury autos, fashion and alcohol advertising, of which there's a fair amount and this is the brand and anchor that allows us to participate in those. Like IGN, a strong social following, 2 million social followers across Facebook, Twitter, Pulp and Google+.

Another interesting aspect to the AskMen business is it's got a local component to it. So we have 2 million subscribers, the local city newsletters that we produce that allows us to participate in local advertising and connect in a different way, whereas most of everything else we do at the other brands very national and international and a very strong position and really allows us together when you look at games, and you look at tech, and you look at men's lifestyle, really to give us this incredible reach amongst men 18 to 49, affluent, who are ready-to-shop and who are ready-to-transact.

This is, I think, actually the most important slide in the presentation, because I really do think it does best of summing up who we are and how we're different and why we're relevant. So when you think about the consumer buying experience, it comes in 4 phases, whether it's a product, whether it's a service, whether it's technology games or any vertical, travel, fashion, this applies. You discover products, you discover brands, you make choices, you buy and you use. Those are universal. And so what we have done from a content point of view is that everything we produce, everything we write, every video we shoot, everything gets mapped around discover, choose by use. So on the discover side, you'll see at our web properties, lots of articles about new products, things that are going to get released. You'll see buying guides, right, ways to navigate different product categories, roundups.

On the choose side, comparison guides, actual reviews of products. We do thousands of reviews across all of the properties. Site search and search functionality and product-finding functionality. On the buy-side, we'll talk about deals, content and click-to-buy links within our content and our reviews, the use of coupon codes to encourage people to make purchases. And then when you bought, how do you use these products, right, what happens when things don't work the way you want them to work? So lots of how-to guides and troubleshooting insights and Wikis, right? User-generated content that helps people really make use of these products. And I think being able to surround ourselves around the consumer buying experience with our editorial content truly is what makes us, I think, very different than what you'll see in the market space.

So who produces this? We've got a pretty remarkable team focused on the editorial side of our business. We've got 90 editors and reporters. These are folks who are full time employees at Ziff Davis. We employ -- they employ 345 freelancers. These are not full time employees, but these are people we use opportunistically to produce content. We've got a dozen photographers and designers. We shoot a lot of product photography, a lot of 360 photography. Consumers love it. It's a great way for people to experience a product without physically touching it. And a pretty substantial video production unit, as video has become a really critical part of our content equation and mix.

We produce 7,000 articles per month. These are our articles, we own the copyright, they form the basis of a library that builds and builds over time. 2,060 videos per month. So you can tell where we think the video goes and the importance of video as a content form as well as the importance of video from an advertising point of view. We produce 461 actual product and service reviews a month. That's a rating, it's an award. We do 675 curated deals. We'll talk about our affiliate marketing business, but essentially we find great deals on great products, and we present those to our users. It's a great service. And we do the work of going across all these feeds to identify those products.

Right now in our product database accumulated over time with 246,000 products in the database and the article database has 600 -- 760,000 articles. We've talked earlier about the differences between print and digital. I should've said one of the obviously big differences is having the library build and accessible at all times, right? So it's not that stacks of National Geographic magazines in your den. I mean it's all available right at the click of a mouse.

Traffic. So we talked about free traffic, organic traffic, and this is, I think, a great representation of the quality of our brands and the quality of our content and how well we are mapped to search and other forms of traffic. So here we've got our 3 core properties, PCMag, IGN and AskMen. They represent 95% of our total owned and operated traffic. So you'll see that between 51% to 67% of our traffic comes from search. So Google, primarily, but also Bing and Yahoo!. All our search traffic is organic and free. So it's below the sponsored boxes, right? So we don't pay for search engine marketing, which is at the top and into the right and sometimes at the bottom, we're right there in the middle.

About 60% to 70% of our search traffic is product-oriented. So again, maps back to our product and buying at end market orientation. So having product-oriented search referrals, very, very valuable and again speaks to the brand. And there's been a lot discussed and documented over the last 2 years around changes being made primarily at Google. All of those changes favor us. They favor well-established, well-known, highly reputable sources of content. And are deemphasizing content farms and people who are looking to just pack the right set of keywords on to a page to get Google traffic, right? We -- that's not our business and everything that Google has been doing is changing the other search engines has really been a benefit to us.

We also have a great direct traffic story. So these are people who to their URLs, pcmag.com, ign.com askmen.com. It does not include, by the way, people who actually type our brands into search engines. That actually goes into the search bucket. So there's some portion of the search bucket, which we call branded keywords for people actually using search as a navigational tool for our website. Nevertheless, that is a very healthy level of direct traffic. There aren't many properties who solely live on search referrals and third-party referrals and don't have a substantial amount of their traffic coming direct.

Website traffic is really not anything that we organize around. These are other entities who view our content as being valuable and link to us and we get traffic out of that. None of these are paying relationships. And then the last bucket, which is emerging and still very small at PCMag and AskMen, a little more substantial at IGN, are social referrals. So this is people coming to an article or to a piece of content within Facebook or Twitter, and we think this is going to continue to be an area of growth, particularly for IGN and AskMen where they have a very strong social presence and as we build the social presence for PCMag.

So traffic organic comes from the right places and growing. So when we look at the tech vertical and I'm only choosing the tech vertical here, so this does not include the games vertical, does not include the men's lifestyle vertical, because we haven't owned those for very long. The tech vertical we've been in since 2010, and you can see from a page views point of view. It's a moment about page views. So we talked about unique visitors, page views are how many pages you view. That's an additive census number, no deduplication needs to happen. It's an easy thing to measure and it's an easy thing to track. So in that case, we use our own web analytics tool, on the true Google analytics that measure page views.

So on a page views basis, and by the way, why page views probably matter more than any other metric is that when we talk about display advertising, display advertising, the inventory that you have available to sell is a function of page views. Typically you have 2 ads per page view. So you take any of these numbers, multiply them by 2, that's the number of saleable display ad impressions you'll have in any given period. So we look very much at page views as probably the most important indicator in terms of managing our business from an internal point of view.

From 2010 to 2011, 53.8% growth in page views. These are monthly page views. In 2011 to 2012, 50% increase in our monthly page views, approaching about 100 million page views on average a month. There are fluctuations and periods, holiday seasons, we'll see higher page views than summer months. In Q1, which we reported recently, our traffic continues to grow and our page views grew 29.5%. We're very good, and we have a real proven ability to grow page views. We understand the relationship between quantity and quality of content, how to get discovery of our content across channels when we have you within the experience, how do we keep you within the experience, drive more time spent and drive more traffic. And as we look at IGN and AskMen, our recent acquisitions, we bring the same playbook, right? So we're very focused on SEO positions. So while they are very strong in SEO today, there are still high-volume terms where we don't rank well.

So how do we produce the right content, manage the right content, to rank better across all the terms for that matter. Features, design changes that are consumption-driven. There are some dead ends within those experiences that we're going to solve. And we're in the process of making those changes that we believe will unlock page views in the way that we've done within the tech vertical. Expanding our editorial coverage, getting more productivity around -- out of our staff. We've been very productivity-driven on the tech side, measuring everything, measuring how much output and the value of that output and mapping what we create to people's interests and social habits. They tell us what's interesting, the signals are all there. It's just a matter of listening to those signals and creating a process and a culture by which we produce against those signals. It's what we did at tech and it's what we're working on at games and men's lifestyle.

We're also in the process of beta testing right now a wholesale redesign of AskMen. We saw the property was ready for a new look and feel. It's very strong and the early testing results are good. So we will look to roll that out towards the end of this month, early part of August worldwide.

So we talked about video, we talked about some of the importance of video and the volume of video, 2 to 7 -- 2 pieces of video for 7 pieces of non-video in terms of what we create. So we get video views from 2 sources. We get video views from YouTube, that's the red portion of this pie. And we have video views on our owned and operated properties. So we are very focused on growing the O&O piece. We prefer O&O videos views to YouTube video views for 2 primary reasons. In YouTube, we have to share revenue with Google. When we sell advertising in front of our video views, okay? In O&O, we don't have to share with anybody. So the unit economics are preferable on O&O. On the O&O side, we control the ad load. We control how often a video ad appears to our video content and on YouTube, YouTube controls the ad load. So for those 2 reasons, we take the YouTube video views, don't get me wrong. We want to continue to have them, it's a substantial number. But as we grow overall video, we want to see our O&O views grow more than anything else. And I think within this chart, our O&O page views -- or O&O views are up 65% year-over-year. Part of the way we're going to do that is integrate video more prominently within our user experiences, drive more page views, drive discovery of video. You look on the right-hand side for good reasons, right? The digital video ad market really is second in growth rate to the mobile advertising market within the digital advertising ecosystem growing at substantial rates, 38% in 2014 growth from about a $4 billion U.S. digital video ad business to a little over $9 billion in 2017. So it's a space we're very bullish on. Many in the marketplace are very bullish on, and we feel we're well-positioned.

So we talked -- you saw earlier the 50% compounded annual growth rate in mobile advertising. When we look at mobile, we break mobile into 2 types, tablet and smartphone. So the blue chunk of this chart represents smartphone; the red chunk represents tablet. These are monthly page views. So in April of 2012 for all properties, IGN, AskMen, the tech properties, we saw 60 million page views a month in March of 2013 that grew to $120 million. So we've doubled our mobile traffic in 12 months. Smartphone and tablet, that $120 million we do about 600 million page views a month on our owned and operated properties, represents about 23% of page views. So right now the tablet traffic actually monetizes just like desktop traffic. The ad product suite that you can buy, the display, the video, is what you can buy on desktop. So it's actually -- we think of it as desktop. The smartphone traffic has a different set of ad creative and we are in the process of trying to create a harmonized set of products so that ad products, ad format, ad unit, so that when you buy once, you can get all 3 screens, right? So you can go to a market or even, say, even a desktop, tablet, smartphone in 1 buy, which is what they want, right? And I think they are 3 screen-based just as we are, marketers are focused that way. So we think we are very well-positioned as we work to change our mobile ad product suite.

So targetability, addressability, that's very important when it comes to digital advertising. Is it working? Is it performing? So one of the, if not most critical pieces of technology that we have built within Ziff Davis, is our data management platform or DMP. And the DMP essentially does 2 things, okay, it collects data relating to people, and it collects data relating to pages and places on the Internet. So the people piece. So when I say people, it's probably not the right word, only in that we're not collecting personally identifiable information. So we don't know -- it's [indiscernible] we don't know its [indiscernible]. We know it is a anonymous user. And here's what we know about the anonymous user, and we make sure to only collect things that keep those people anonymous, right, there comes a point where if you know these 6 right things, you know who that is, we avoid that, okay? That's best practices within our industry. It is the self-regulatory framework with which Internet advertising operates today. So it's Non-PII. But when we do collect, so what do you view, across all of our properties and across our networks? What are you clicking? What are you searching? Where did you come from? Did you come from a search engine? If so, what was the query that brought you in to the experience. It is a valuable set of data because it tells us a lot about where you are in the moment.

Places. then we look at the pages, on which advertising can appear. What's the page about? What are the keywords on the page? Is the sentiment positive or negative? Deep level of comments, what are the comments saying? Taking what we know about users on an anonymous basis, what we know about the pages on which advertising can appear. Our data management platform essentially creates targeting logic. It targets the advertising, which we'll talk about in a minute, the different forms. It informs their placement.

So really do 3 things that all marketers in the digital space look for. Click, what's the CTR? As much as you may or may not think clicks matter, they matter. Every marketer measures CTR, click through rate, measures the effective cost per click. It's a metric. They're going to measure it, and you want to be up, not down, you want to be better, not worse.

Conversion. For many marketers they can look at clicks and views and see that they convert. Not all marketers have web-based conversion. They don't all sell stuff online. They may just market things online, sell offline, but if you have a conversion metric, conversion matters. And then engagement. When we got them, did they stay? Did they experience my brand, my product, my service? So everything we do from a data management platform is how do we align the data that we're collecting to get the success metrics that the marketer is looking for. And the data management platform is our layer on top of, really, all forms of advertising. First form, and the dominant form of advertising for our company, is display advertising. So display advertising is 60% to 65% of our company's revenues. It's the largest source, therefore, of our company's revenue, and really comes in 3 categories: our owned and operated sites, our network sites and what's called our real-time bid and inventory sites, which I'll explain.

So we sell IAB, Interactive Advertising Bureau, display units. That is what is the standard across the industry. We price these on a cost-per-thousand-impressions basis then page views times 2, pretty much your universe of impressions, we sell through the impressions and price them on a cost-per-thousand basis

On the O&O sites, we run them on our 600 million monthly page views. On our network sites, on these 150 net shelter sites, we can also target our advertising. And then the third group is a very interesting and emerging part of our business model, and emerging part of the Internet advertising landscape. There are ad exchanges such as Google's, called Google Ad Exchange, that exist in the market, that allow you to buy impressions on a biddable, impression-by-impression basis. So, typically, it's a website that are small to medium or large who have unsold inventory and they put them for liquidation of the exchange. We will buy advertising on the exchange as a way to supplement our buys on O&O and our network sites. Why? Retargeting. So we see a user, we know their end market for a product, we want to create as much frequency as we can. So we'll gladly buy that user at ESPN, if we can find them at ESPN, purchase the impression through Google Ad Exchange, for instance, and then mark that up and resell it to the advertiser. And this is very powerful because there are few companies that can offer what I'll just call the pyramid, which is owned and operated premium content, extended network for reach and then RTB for retargeting and a lot of, just really, high-volume, well-priced efficient advertising. And it's a pig part of the Internet advertising ecosystem. And without our data management platform, it would be very difficult for us to do that because we'd be blindly buying ad inventory on the RTB. I often think of it as it's a market where if you have information, a symmetry, if you know something about that impression and that user and that page that no one no else knows about, you're going to bid, they may not, you may bid higher just to clear because it's a valuable impression. And so having the RTB piece alongside the other 2 pieces is very critical. So this is our display advertising business.

Our video advertising business is emerging, it's about 10% of our company's revenues. And again, it's serving advertising on a pre-roll advertising basis, which is the standard type of advertising, which is 7-second, 10-second, 15-second ad that appear before a piece of content for you to view. You have to view the ad in order to view the content. That advertising runs ahead of video content on our owned and operated properties, right? And then also within our YouTube channel. So not everybody within the YouTube ecosystem has the right to sell advertising on a pre-roll basis. If you add a certain scale, which we are, we have the ability to sell within our own inventory but share with Google.

Right now, IGN and AskMen have the most traction from a video views point of view. They've done a very good job from a video production and driving video traffic, and we think we've got a lot to learn for them on the tech side and building out the video business within the tech vertical.

The third rent form of ad -- form of revenue we have at the company is affiliate marketing. Affiliate marketing is about 20% to 25% of our revenues, so the second largest revenue stream within the company. And there's really 2 parts to this. There's the retail part and there's the enterprise part. Talk about the retail part.

So on the retail part, we have an editorial team that goes through feeds from hundreds of retailers everyday to identify great products that happen to be on sale, great products that happen to have a coupon code, great products that happen to have 2 coupon codes, when worked in conjunction, can get you a great deal. People want a great deal. And so we do the hard work of identifying these great deals. We then present those deals. Those deals get presented on web pages, at LogicBUY.com which is 100% about deal, but also within PCMag and IGN and AskMen, a best-deal-today page, for instance.

The way we get compensated is when a consumer clicks through on any of these deals, see the deal, in some instance we get paid on a cost-per-click basis. In some instances, we get paid on a CPA basis. In other words, if the person gets the cart and checks out we get a piece of the cart. We ultimately translated that back into a revenue per click. And we're always looking at what is the optimal revenue click, is it the straight-based CPC or the CPA, where are we going to get the optimized revenue per click.

And then, what we also do is, within products that we're reviewing, within buying guides, it's not about a deal, it's a product. We have click the buy links and buttons within there. So we have something we call the commerce splendor that, literally, on a real-time basis, on any of our properties, finds the product, says, "That product is this." Pulls in what is the best price for the consumer and the best unit economics to us. So that we're always -- and that -- and it change, I can change realtime, so we're looking on a real-time basis on all these feeds to say, "Okay, this mouse that we reviewed on computershopper.com is actually whatever mouse this brand is, and it is available at least 5 places that we're going to present this one, because this price is the best price, it's the same as the other 3, but we're getting the best unit economics because they're paying us on a high CPC basis, because merchants will change what they pay us all the time and we'll switch from CPC to CPA all the time. They can ultimately decide what their position on our marketplace is going to be, the better they make economics and in our marketplace. So that is at the retail side.

And by the way, not only, obviously, do we like it from a revenue generation point of view, it is a proof point from a transactional point of view. We'll go back to display video advertisers and say, "Hey, listen, look at the kind of transaction volumes our properties could drive. We have buyers. The ability to control that close that transaction loop is I think very important to marketers.

On the enterprise side of the business, it's quite different. They're not -- they don't click to buy a server, right? That's just -- that's too big. You don't click to buy a CRM system, right? It's a highly considered purchase, it's a multi- month process, it involves people, you can't just dis-intermediate and make it a click to buy. Nonetheless, they need lead. This business needs leads, right in the way that the retail side is getting traffic lead, we want to be able to deliver leads, so what we do is content marketing. So we'll work with an IBM or we'll work with an SAP and we'll say, "Okay, give us a white paper, around your product to service, help us create a white paper around your product service, we'll work out a way. We take that white paper and we market it. We market the white paper again through our web pages, to our e-mail database and we'll push this content out. When you register to review this free content, that essentially is a business card set of data that you're providing, we verify it and then pass that on as a lead. So that is price on a cost per lead basis.

In the end, the retail side is lots more volume, lower price per for lead, if you want to call it that, the enterprise has much lower volume, much higher price per lead. In both cases, a way for us to connect content and commerce, a way for us to close the loop and bring, in a really material way, customers to our clients.

The last business in our portfolio, our last way that we make money, is our licensing business. This is about 5% to 6% of our business, and it fits into 2 spaces. One is brand licensing -- what we call brand licensing, the other is international licensing. So on the brand licensing side, we, once you win, we will license to the winners award logos for them to use in their advertising, their promotions and websites. We had 187 people pay us to use our logo in their products and in their advertising. I love this part of the business because not only are we getting paid for these marks, it demonstrates the power of these marks, so it's a self-fulfilling thing. Of all the marks they can choose, many of which are free, they choose to pay us to use that imprimatur. It just feeds the cycle of this is the most important imprimatur you want. It also creates a ton of branding for us. So after I've shown this to you, I guarantee you, you will see a truck, you will see an ad, you'll see something and you go, "You know what? I saw those logos." It's just great for us, right? And I think this is -- it's got strategic value well beyond the revenue value that's there.

On the international licensing side, we have local versions of PCMag and IGN, and now beginning to roll out with AskMen. And this is all done on a partnership basis. So right now, from an owned and operated point of view, we operate IGN, AskMen U.K. version, IGN, AskMen Australia versions. Outside of that, if there is a local version, it's in partnership with another publisher.

Typically, they take the risk, we provide brand, we provide content and redirect of whatever traffic we have in that market. So, let's say, Germany. We have German traffic, people coming into our properties for the English language properties and redirecting them to the German property. They still have the choice to go to the English language property if that's what they want. So we can tell a partner, "We'll bring you traffic, we'll bring you brand, we'll bring you content." What's great about this is they're putting in a lot of effort and work to socialize and build our brand in these markets. And if and when they get to critical mass, we always have the opportunity to convert those to owned and operated property. So right now, happy to work on this basis. It's a great market entry strategy for us and a great way to establish our brand and lots of territories outside of the U.S.

So from a decision point of view and from a barriers-to-entry point of view, I've hit on a number of these things that's just worth, I think, restating these. So established brands with incredible consumer and advertiser trust can see the years that these brands were established, PCMag established over 3 decades ago, all of these brands are at least a decade or more old. That really, really, really matters particularly around the second point, which is our SEO position is a function of the reputation and the years these brands have been on the Internet. There is a definite relationship and correlation between how established you are when you were established and how reputable you've been over that period of time. And having our strong SEO position, you saw 51% to 67% depending on the property, traffic is critical. So we don't have to pay for search engine marketing, which is very expensive if you're trying to buy traffic.

We have, across all of our properties, about 7 million followers. We are very bullish on the idea that these 7 million followers will begin to generate more substantial traffic within our traffic mix. And like our organic search traffic, be free to us and not traffic that we pay for. This unique ability to serve display advertising and video advertising across our owned and operated properties, across the independent sites in our network and using RTB inventory, that is unique, I don't actually know of another publisher who is doing all of those 3 things and using a data management platform on top of it to really, really drive the business.

And then, I would say that it's good to be #1. And we talked about, kind of, scale, and we talked about the importance of bringing multiple verticals and multiple properties and reaching -- and frequency to our marketers. Having that position is very strong, right? And typically, what happens with many marketers and advertisers is that when they look to send a request for proposal, or an RFP, for immediate company to put a program together for them to spend again, they typically don't go very far down the comScore ring. They're not going -- they may go 5 down, they may go 7 down. And so when you're up there at 1 or 2 or 3, that's a very, very strong position to be in, that's a good neighborhood in which to live.

So talk a little bit about our performance. So from a 2010 to 2011 point of view -- no, sorry, in 2012, we grew revenue by $0.54 and EBITDA by 71%, that's '12 versus '11. In Q1, which we reported recently, revenues of $22.9 million, up 136%, EBITDA up 433%. Obviously, we're a seasonal business, we see a larger share of our revenues come in Q4 around holidays, which is to be expected. The revenue guidance that Scott provided at around quarter 1 was $125 million for the Ziff Davis division. It's a very large addressable market, whether it's a $50 billion U.S. market, $60 billion U.S. market, it's still a very, very large market for us to play in. Strong top line growth, great industry forecast around all forms of digital advertising display, mobile video. We think the affiliate and content marketing piece will grow with importance within our overall mix and overall revenue equation. And look, what I think many people like about businesses like ours, media businesses, is the high degree of operating leverage, right? As you scale this business, the marginal economics are very, very interesting, they have been in all advertising businesses. And the same, certainly, can be said here. Great EBITDA margins, we have the ability to invest and grow our partners, and being within the j2 environment has been hugely beneficial for us and a real track record of profitability.

So a little bit about the team. So Scott did a nice job introducing me. I did spend 15 years at Time Inc. it's a division of Time Warner, both on print and digital side, as well as in roles overseeing both. And so have a deep amount of -- have a deep prospective on this space, led by Ziff Davis with Great Hill Partners, identified it as an opportunity and I think, very quickly, demonstrated strong traffic growth and monetization discipline and a couple of smart tuck-in acquisitions that we could create some significant success pretty quickly. Very active in the industry. I'm the Vice Chair of the Interactive Advertising Bureau, which is the main policy organization within our business. My colleague, Steve Horowitz, who's our Chief Operating Officer, has made his career in high-value verticals at companies like Bankrate, which has done a very good job in monetizing its end-market audiences. Andy Johns, our CFO, has had a string of successful tech-based businesses. And our CTO, Joey Fortuna, is really an expert in data mining and optimization. So when you think about everything that we're doing, the data managing platform piece, the affiliate marketing platform piece, how to map contents of traffic, all that is data, and that's mining and analytics and he's as smart as they come and a huge asset for us. Jimmy Yaffe [ph], who manages corporate development and strategic initiatives, great private equity investing background, great corporate marketing background, a great representative for us with many of our customers. And then Steve Hicks, who apart from being a very good general counsel, is actually very connected to the industry as co-chair of the IAB Legal Affairs Council, which is very important because we are very current on all of the -- both regulatory and self-regulatory elements and realities of our business, which change and which fluctuates, so that's great to have.

So we have a very strong team. This team has been in place. We have a number of folks, really, from the beginning -- from 3 years ago. And a team that has had a really great track record in operating media businesses, Digital Media businesses and integrating acquisition.

Okay. So this is the last slide of my remarks, and it really just speaks to what we really believe, which is the best is yet to come and that we've got lots of opportunities, traffic growth, we talked about it, the FCO improvement, the page use per visit, keeping 12x higher, particularly at the newly acquired properties. We're going to continue to be able to grow traffic, which is critically important. It gives us our market position within comScore and it gives us the inventory that we look to monetize.

Video advertising. The shift from TV to online video is happening, both from a -- particularly, generationally. I mean I think if you look at younger people, it is amazing, the degree to which that shift is happening and so we're able to participate in it, and it is a substantial part of what we're doing.

Mobile advertising. This is the fastest-growing traffic set that we have. And it is the fastest-growing piece of the advertising market, in general, all forms of advertising. International, we just talked about that. We want to expand our partnerships in key markets and migrate some of these larger partners to O&O. I think we're very bullish on the playbook outside the United States. We generate outside of the U.S., Canada about 35% of our traffic. So the opportunity is pretty substantial for us outside of the United States.

Ad targeting. It's a performance -- advertising is a performance business, and I think -- particularly in the digital advertising space. And for us to be able to have the tool and capabilities to deliver that performance, I think we're only beginning to scratch the surface in terms of what we can do. As for systems, learn more, as they refine and figure out different variables that drive performance.

And then expansion. When you think about our model of end-market content and audiences within tenant and multiple rents, it's not just unique to tech and games and then lifestyle, those are -- they're next to each other, they're contiguous, so they were natural for us. But we look at finance, health, travel and auto as other verticals in which we think our model and our approach would thrive. And so I think our philosophy around acquisitions, very much what Scott described, it's got to fit our model, it's got to make sense, there has to be clear synergies. And we'll be very disciplined around price, right? And I think that's very important in the Internet space where sometimes there isn't always that discipline.

So that's the extent of my prepared remarks. I want to invite Scott back up to go through a few more slides, and then we'll do Q&A.

Robert Scott Turicchi

Great. Thank you. Maybe you just want to sit up here. So as you saw in the last couple of slides, in the financials, in our earnings presentations, this is a business that lends itself very much, from an analytical standpoint, to the use of EBITDA. So we do have a couple of slides here, which I will not go through in great detail, but they basically reconcile the EBITDA numbers that we referred to, to its nearest GAAP equivalent of net income.

One point I would note is that, particularly within j2, there is substantial amortization of intangible expenses for all 3 acquisitions that we have done. I think our current estimate is that on a rolling-12 basis, for all 3 acquisitions, we will expense about $16 million a year of non-cash charges. So that has a substantial impact when you move from EBITDA to net income.

And then, finally, the reconciliation for the first fiscal quarter. This presentation is available. You will be able to download it either from our website or you can go to sec.gov, where it is also filed as an 8-K. And I'd now like to invite up Steve and Andy, to take questions. I would ask that if you have a question, raise your hand. Laura, in the front, here, will provide a microphone. Please state your name, your affiliation and your question, and we'll answer. We have about 40 minutes. The webcast will end at 5 p.m. Eastern, so with 5 minutes to go, I will alert that we'll be taking the final question.

Question-and-Answer Session

Robert Scott Turicchi

Okay. Who's got a question? Shyam?

Shyam Patil - Wedbush Securities Inc., Research Division

Shyam Patil. You may have given -- you may have had a slide on this, but when you look at your traffic growth across properties, what's the desktop traffic growth versus the mobile growth? Or if you got desktop versus tablet versus smartphone?

Vivek Shah

So we did, on that slide, breakout the mobile traffic between tablet and smartphone, tablet -- graph -- the overall growth rate was 100%, if you look on 12 months ago, to March. And the piece that is -- the smartphone piece is the main driver of that. We have not broken out desktop versus mobile, but if you go a few slides before, on the tech vertical growth -- here you go. So this slide includes all forms, so desktop and mobile and smartphone. If you actually start to look at it, you'll see, that from a contribution point of view, that 50% growth rate, '12 versus '11, is a little bit lower but pretty much close to that for desktop. The desktop growth would be consistent with that. And the reason for that is in the tech vertical, the smartphone traffic is about, call it, 10% of that piece of equation, so you could just sort of solve for that. So the desktop growth rates are in and around what this is, which is the overall growth rate, because the contribution element in the tech vertical for smartphone, et cetera -- smartphone and tablet, is a smaller piece. But I take you sort of back to my comment, which is we're seeing these growth rates at much larger basis, both in desktop and in mobile, so it is all positive. So, I mean, actually, that sort of high double-digit range on the desktop piece. On IGN and AskMen, it's early. We've owned the businesses, really, since February, so we're not -- you're not going to see the benefit of, sort of, the -- what we're doing, grow traffic desktop, tablet, mobile, really until probably latter part of this year and early part of 2014.

Shyam Patil - Wedbush Securities Inc., Research Division

Okay. And then on the monetization side, you mentioned display is 60% to 65% of revenue. Can you talk about how the CPM's range, maybe, across properties or what the average CPM is?

Vivek Shah

Yes. So we haven't disclosed average CPMs, but what might be helpful is, if you look by verticals -- let's start with verticals. Tech CPMs are the highest, followed by games and men's lifestyle, which are consistent with, really, what the marketing allowables and the price points and the underlying products are. Tech products are more expensive than games and entertainment products. And men's lifestyle advertisers, because they're more brand-focused, they typically, sort of, accepted -- have not been charged the highest CPM. So it's tech games and men's lifestyle. Then if you look at format of advertising, video advertising has the highest CPMs, not only in our business, but I think in the industry. From a mobile point of view, right now I'd say that for us and pretty much everyone in the Digital Media space, revenue hasn't yet caught up to traffic, that is still at the comps. So the traffic piece is there, but the mobile spend piece right now -- so putting the CPM -- I'm not answering the CPM piece on that, I'm just really talking about where is mobile within our display mix. It's still a small piece of our overall display advertising. Again, I think, consistent with the market and I think really sets the change. Probably, I would say, towards the latter half of this year, I think in the holiday season, we're going to see a lot of mobile dollars sort of open up. Part of it is how are the agencies handling mobile advertising display group and the new mobile group. And so, I think a lot of the ad agencies that broker the deals on behalf of clients are still trying to figure through where does mobile fit within their media mix. But directionally, that's where the CPMs live.

Andy Johns

And it's also where we look at here on the IGN side. With videos, we are -- our pre-roll on mobile is the same as pre-roll on desktop, same price, no distinction in what we're doing in the asset management mix. And we have a redesign coming up, fully responsive design across all 3 screens and advertisers buying the audience, not the screens. So there's ways in which we're taking different approaches to the mobile and desktop relationship. And the nice thing is given the amount of assets that we have, we're experimenting with different approaches and some assets act like the canary in the coal mine for how we should go about and approach in other parts of the business.

Laura Hinson

Anybody else?

Unknown Analyst

So following up on that. Can you just give us a feeling for how CPM rates are trending, whether it be -- break it up between video, as well as for just display. Where have you seen that coming over the couple of years? Where do you see it going in the future?

Vivek Shah

Simon [ph], I think part of it is mix, right? That's why overall CPM, average CPMs don't always work as you are mix shifting more towards RTB. RTB is going to be lower CPMs, okay? It's an -- it's the efficient higher volume, almost unlimited amount of inventory for us to trade in RTB. So when you look at it that way, right, our RTB -- again another to look at CPM is -- our O&O are higher than our network, are higher than our RTB. If the mix starts to move more towards RTB, it could bring your overall equation down, but if we're seeing outside revenue growth, we're okay with that because as long as we can maintain our gross margins, we're going to maintain our gross margins. CPMs matter more in O&O where we have a finite amount of inventory, and we want to get maximum value out of that inventory. On the RTB side it's almost infinite, right? So the volume of impressions are literally in the trillions that you can trade on within exchanges. On the video advertising side, the CPMs are very strong across the board, and they continue to be very strong because quality video inventory, really outside of YouTube and Hulu isn't really at scale yet. So the CPMs that we're seeing there are very strong. So I think that, in general, because of our mix, our CPMs will be viewed as very high CPMs. Again, it's a mix element as well, and that mix can shift. We look a lot at, ultimately, revenue per advertiser and the gross margins associated with revenue per advertiser, and using all the pieces to optimize out-of-pocket. What are we getting from them and how much are we netting from them? We operate at consistently an 80% gross margin, and so for us, it's just putting the puzzle pieces together in the right place.

Robert Scott Turicchi

Dan?

Daniel H. Ives - FBR Capital Markets & Co., Research Division

Yes, Daniel Ives, FBR. My question, since the acquisition, maybe you could talk about any transition or differences under the j2 model? As your company has gone through evolution in terms of you're now in j2?

Vivek Shah

So anytime you go through something like this, you hope for the best and you expect the worst. And I've been, and I won't speak for my colleagues, I'll let them speak for themselves, I've been really, really, really surprised and happy. It has been a very smooth transition. And I think for a few reasons. I think from an operating philosophy point of view, the leash is long and I think there is a feeling of, guys, keep doing what you're doing, you're doing a very good job. Right, we don't want to substitute our judgment for yours in matters that relate to the operations of digital media, that's why you're here. And so that doesn't always happen in situations like that, that has happened here and I think that's been great. I think second to that, j2 have demonstrated a real willingness to invest in IGN and with NetShelter, both competitive processes where I would argue we won not because we pay the most, but because we were efficient. And together -- and we move with speed and purpose, not because we're reckless but because j2 is very good from an M&A point of view, we thought we were very good from an M&A point of view, so it's a great marriage. So I think the ability to do deals like that, again, what you're going to see is it's going to take 15 people I've never met to get this done or not. The board of j2 -- 2 members of the board are here with us, Bob Cresci and Michael Schulhof, have been great and been very supportive, including Chairman of the Board, Ric Ressler, Nehemia Zucker at j2. So I've been thrilled, I mean, I'm really happy with how things have been working, like...

Andy Johns

Yes. I think it's one of those instances where it's as advertised, and that's really a great thing, versus I've been using Rogaine for 3 years and that hasn't been as hard. So it's been as advertised. And as Scott and Nehemia are clued in, as they were, in terms of what we said during the acquisition process, through what we've had now on our ability to go out and acquire great assets in a very fast period of time, has been, as we've said, you sort of go and not sure what to expect and it's -- that was the expectation for us. It's been great.

Vivek Shah

Yes. I actually want to build on that as well in that I think j2 has really helped us be ready to be big, which has been just tremendous. They have a science, is the way I would almost describe it, it's the way the back office operations and the support operations run through the business, and they are helping to bring us along very, very rapidly. As Ziff Davis, organically, has been growing and as we have been making these acquisitions as we've discussed that we've been getting terrific support to help us with the integration process, to help us with the controls process, everything around it.

Robert Scott Turicchi

Dan, I actually want to take the side of that equation, because when j2 made the investment in November of 2012, remember, we only bought the Ziff Davis properties. Ziff Davis was not #1 comScore rank at that time. We were not in games, we were not in these other areas, and quite frankly, we didn't want to just to make an investment in a $50 million, $60 million digital publishing business that may be gross 20-some percent and has nice growth in EBITDA margin. That's a nice deal. But we had a vision that was similar and consistent with what the team had, but there was a much bigger opportunity here. So you have to also look at it from our perspective, which is, once we made that investment, it's okay. Where are we going to go next? Because M&A is a core skill set of j2, we like to put our capital to work. There was a list generated, probably even during the diligence, of where are the next targets? And I have to give these guys a lot of credit because by being insiders in the space and by knowing within the digital world where the soft points are and where the deals are coming from, that allowed us from an M&A standpoint to get ahead of the curve in both IGN and NetShelter. Those are both very highly ranked in the comScore. They were in the top 4 or 5 of the desired assets that we wanted to acquire within the tech digital publishing space. So to be able to do that within a 6 month's time frame from acquiring Ziff Davis, gives you a sense, from our perspective, of the value add that they brought to j2, not just in operating the business, growing the page views, growing the revenue and delivering the EBITDA, but also thinking strategically where these other assets that can be brought in to the Ziff Davis fold to make a real impact from a digital publishing perspective. And hats off, I think it's been a good start and I'm convinced we're very far from being complete, but at least now we have a critical mass of properties in these 3 spaces.

Daniel H. Ives - FBR Capital Markets & Co., Research Division

And that sort of leads me to my next question. So how do you balance -- you've obviously been there, successful start but with the IGN acquisition, in terms of more acquisitions rather than just transitioning what you have, drinking out of a firehose feel, like how do you sort of balance that in terms of other acquisitions in other...?

Vivek Shah

Yes, it's a great question. So I mean, I will say in fact the question, how do you feel about your current set of assets and living with those? You can't do anymore. There's a lot of growth in these assets. And I just want to make that clear because we do feel like there's just so much outside, amongst all the things we talked about. Having said that, we do think that there are interesting opportunities out there. When they present themselves, we have a system by which we analyze them, we diligence them and we know what are allowable and why -- when it'll makes sense. And then from an integration point of view, I would say that I think between all of us, we've done this so much that I won't say it's sort of down to just a turnkey approach, but it's short of this, right? I mean this is content, each traffic and it's the monetization of traffic, and everything else is noise. So let's take IGN. So when we acquired IGN, we sat there and I said, what is its most profitable core? That's always the first question, right? What is the most profitable core? What set of activities should we eliminate that are revenues and expenses, that are low-potential, high-distraction. And let's focus on the core. And there was a lot going on: UGO, 1UP, GameSpy. These are all things you don't know, you won't know because we got rid of them. IPL, these were things that were stealing from the core business, right? We walked away from them. Revenues, profits in some cases because they didn't have potential, they didn't fit the model. So we're willing to do that, get straight to the core, its most profitable core, it's consistent with what we do and then let's run some repeat. Because then we've seen that moving, right? Where I would get concerned is where some model is very, very different than ours, right? Where it's not display, it's not video, it's not affiliate, it's licensing, it's something else. That's where we may still do it because we see potential and application. But I'd have more of that concern of drinking from a firehose, how do we make this work, while we've got these other 4 plates spinning. So look, I think that this is part of what we have -- what the team has demonstrated the ability to be comfortable around.

Andy Johns

Yes, I agree. And I think that each of these businesses, they have editorial functions, they have engineering functions, they have -- and they're not too dissimilar. We understand what editorial costs should be for -- to growth X amount of traffic and how that should align with our ideal philosophy and how we need to set up our engineering group to support all that stuff. And we've been able to do that as -- and as part of it is making sure that each individual business has enough leeway to run itself to be competitive and then also make sure that we have the right services, like finance and other things to support the underlying. So we can get out the total synergies out of the business. And it's -- again, as Vi mentioned, it's been a playbook that we've run in the past, I've run at the Bankrate before and something we're very familiar with. And the other thing, which I think we are all very familiar with and what I learned a lot from Vi is we make the right talent decisions and we don't waste time, we don't waste time. We either -- we know it pretty quickly whether you're going to be in the structure and the game plan that we need to execute, and we're not. And if you don't do that quickly, when you go through acquisitions, that's where a lot of territory gets lost very, very quickly. And we've managed to be able to do that and then also bring in the right people. A good portion of the people that are in the company now are people that have worked for us in previous jobs.

Unknown Attendee

Just a couple of questions. One on the financial side. If you look at the numbers for the first quarter, EBITDA margin was sort of in the mid-teens. You talked about gross margins operating to an 80% level. Can you talk to us about how those margins go from the mid-teens up to -- maybe talk about the mature margins, but is there a tipping point at some point where you -- with the existing business, assuming no inorganic growth, if you go from $125 million this year to X next year, is there a point when there's a fixed cost of overturn and you just -- you start to see more incremental profitability in the EBITDA line?

Vivek Shah

Pointing to Scott. Scott, what... ?

Robert Scott Turicchi

How far do I go with...

Unknown Attendee

Give us all the details.

Robert Scott Turicchi

Yes, I think you should handle it.

Vivek Shah

Okay. So let's take the question about within the calendar, within calendar 2013. So roughly speaking, 35% of our revenues land in the fourth quarter, right? So when you look at our business, the fairly finite amount of fixed cost and then your 80% gross margin, that's where you're going to pick up a lot of your EBITDA margin, right? So when you blend it across the year, you'll get to a blended average consistent with what we have described in the past. So the seasonality play into 2013. Then as you grow off of the 2013 base, we believe the way we are set up is there is a fair amount of EBITDA flow-through incremental revenues, right? So not going to pin me to what is that percentage, but I can tell you it is the operating leverage concept. So in the same way that happens in the fourth quarter, it will happen when you compare 1 period to another period in the overall gross revenues growth. Another way to say that fixed cost in our business, people in rent are the fixed cost, right? And as the business scales as we sell more advertising, there isn't much we need to add to the fixed cost base in order to execute upon that. The fact that argue with the fixed cost base today has built into it a fair amount of investment into future revenues and the ability to extract growth that we're not seeing today. So even on that basis, I think our cost base reflects the level of investment for future return. So EBITDA margins goes up as revenues go up.

Unknown Attendee

Can you give a little more detail on the fixed cost side, in terms where you are seeing maybe just a percent of revenue?

Vivek Shah

Right. So if you -- have we given...

Robert Scott Turicchi

I don't know.

Vivek Shah

What guidance have we given on a full year basis besides revenue?

Robert Scott Turicchi

Just revenue.

Andy Johns

Just revenue.

Vivek Shah

It's hard to answer that question.

Robert Scott Turicchi

No, but I think you can talk about -- I mean the core costs of the business are really people, and they fall into a couple of 3 different areas, and those drive basically the core of the cash cost structure of the business. I think you can talk about that.

Vivek Shah

Yes. So why don't we say this? so our headcount is 445 people. The associated expenses of those people are the $50 million to $55 million range. That is the bulk of the fixed cost of the company. The typical 20% cost of goods sold accounts for that piece of the P&L, and then you do have other costs: rent, $45 million a year, some special services here and there. That gives you a sense I think of how the map works. So if you take those pieces and say, "Okay, that $125 million is $175 million," Or [indiscernible] $80 million at $175 million, what do I think grows here and then what's the pass-through on EBITDA?

Unknown Attendee

And that $50 million, $55 million has some growth built into it, that's the engineering -- that's not the content producers. That's the engineering?

Vivek Shah

That's everybody.

Robert Scott Turicchi

That's everybody. That's everybody.

Vivek Shah

That's the entire company.

Unknown Attendee

Any breakdown of that in terms of how much of that is engineering versus the content producers?

Vivek Shah

We haven't -- I can give you some sort of rough numbers on there. So from an editorial point of view, I think it's on chart 96b plus. The editors and writers put the [indiscernible]. Let's call it about 1/4 of our staff are what I'll call content creators. The other 1/4 of our staff are what I'll call sellers of advertising and supporters of sellers of advertising. Then the other one half is a mixture of engineering, finance, legal and other sort of support function in the organization, but really our largest 2 would be sales and content creation. We have product development and that can sit either on edit or that can sit intact and/or it can sit on its own. So typically, as we scale in traffic, if our traffic growth is predicated on better discovery and more output, you don't actually need more people to drive traffic. If it's predicated on more content and you're at optimal output, then you're going to need more people. We think we need more productivity and more traffic out of current people. So we can get a sense for me as to our traffic growth is not going to be a function of headcount growth. On the sales side, as you scale in revenue, there is just such a certain volume of advertising and accounts for the certain single seller will carroty, right? So when we hit that tipping point as we grow the business, I think we have some room, you're going to add there. I think the other function is really -- are almost a not a function where revenue grows. So finance function, legal function, the engineering function, the IT support function. I guess that headcount when it go up with those others, you might need a couple of people here and there. But we feel -- I think we feel good about that universe that we have. And then outside of headcount and rent and has some of these professional services, really there isn't anything else. You want to talk about what makes up the cost of goods sold, what is income?

Robert Scott Turicchi

Yes, the cost of goods sold is comprised of a couple of things: our web hosting costs and kind of third-party ad serving costs that we incur are in cost of goods sold. And the other piece, Vi referred to it earlier, with our -- real-time bidding program and some of the other things where we're buying inventory from third parties and being able to leverage that. That will also be in cost of goods sold, those are the primary components.

Vivek Shah

And the revenue share on the network partners as well which is subsidized.

Robert Scott Turicchi

Yes, same kind of things.

Unknown Attendee

And just a final on that. So what's the target? And I think Scott may have talked about this but in terms of an EBITDA margin for this business as we look out over a few years.

Robert Scott Turicchi

Well, I'd answer a little bit differently. There's not a target EBITDA margin in part because it matters where the incremental revenue comes from. If you're call would be set earlier, you can make an arbitrage on realtime bidding but it's going to be lower margin versus display advertising or licensing coming to owned and operated. So your mix of revenues, north of wherever your baseline is matters in terms of driving the margin. I think the point is, all of those activities are EBITDA profitable in absolute dollars and sometimes we will pay a lower margin RTB trade because that's available and there's no way it harms other activities of the business. Now what I have said is I'd like to see a business that is double the current size in terms of revenue. And I think that if you have a similar mix of revenue as exists today, then that would take you from the implication of these margins based on Q1 and what was done last year would imply somewhere not fully synergized this year in, say, the mid-20s to maybe the high 20s. You should be able to tack on up to another 10 points on top of that, meaning you might be approaching 40%. But it will be highly dependent on where that incremental $100 million or $125 million of revenue comes from.

Unknown Attendee

Okay. And then just one final. I'll give it back. On the M&A side, your guidance for this year is $125 million, you talked about having some deals you had targeted or that you looked at as a common list that you guys are putting the team together. Ballpark, and I guess I'm your timing and I guess who, if you look at all of those other opportunities out there, how big is that potential revenue M&A pie? Is there like another $300 million revenue of companies that you potentially could buy at the right price over 10 years or...

Robert Scott Turicchi

I'm going not going to let them answer. No, I think -- I mean, the issue there is, look, we have a list like we do in cloud. And some of the things are more dreams that might not be executable because of who the seller would be, or because of timing or price. There's all kinds of issues. I think what is important to understand is just like on the cloud side, there's a healthy list of active targets for us to go after. So I'm not concerned that there isn't substantial inorganic or acquired revenue opportunity that we could access over time if we wanted to. I think going the very near term, the next 90 days, there's a lot to be done with the assets that have been acquired this year. There's a lot of opportunities that Vi talked about this and not unlocked in the model, it's not unlocked in the margin structure. So in the very, very near term for media, I think the desirability is, let's we'll start to unlock some of those hidden nuggets that we knew where there at the time of acquisition but for whatever reason, were not either realized or fully realized by the predecessor management teams. But just like it's true with j2 and cloud, we will always going to be opportunistically looking for additional property that makes sense within this sphere of these 3 verticals. And then maybe over time, if you really open it up, it's a much different answer, if you start thinking about the finance, the auto and some of these other verticals that Vi hinted at the very end of the presentation. So I'm not going to give you the answer to the question, but there's no shortage of opportunities, both within the verticals and over time, by going into other verticals. Sorry, Greg.

Gregory Burns - Sidoti & Company, LLC

As you flip through the slides, not being a media guy, I get caught up in online, desktop, mobile, and you have CAGRs up there that are very high CAGRs in terms of expected growth rates. If we take the mix of those, what is sort of the expected industry growth rate that's applicable to your mix? And then, comparing '12 to '13, what's sort of the rate of decline in this industry?

Vivek Shah

So if we actually...

Robert Scott Turicchi

We'll go back, yes.

Vivek Shah

Yes, that's it.

Robert Scott Turicchi

You want the other one or...

Vivek Shah

No, this one. So this is whole market, right? When you look at all of digital advertising, it's either online or mobile. And within online, you're basically including video. So video is a part of that form of advertising. And there are other forms of advertising in the text, links, et cetera. So I would say, these growth rates are the overall growth rates, right? So I think the slides you add in the source was I think 16% to 17% compounded annual growth over the next 4 to 5.

Robert Scott Turicchi

4 to 5 years, yes.

Vivek Shah

That would be -- if you ask me, what is the mix of all that stuff? Within that, the highest growth rate is mobile, you see there. Within online, the highest growth rate is video within online. Does that make sense? And then display would be the lowest growth rate, but it's the highest concentration of this. So it's almost consistent with the 14.6%. So it goes up because mobile will bring it up. But so say you're in the 15% to 17%, 15% on the biggest piece of the business display all the way up to 50% on what is a small piece of the business today, which is mobile. That...

Gregory Burns - Sidoti & Company, LLC

Yes, that's actually perfect. Could you relate that a little bit to Q1 results? I think it was around 22%. How do we look at that? Are you at the industry, above where you're mix kind of lead you to? The 22%, when you see some numbers in prior years that are much higher makes you wonder if there's a decline rate, but you're actually saying a lot of these numbers are very high numbers, it's just a matter of where in the stack we are.

Robert Scott Turicchi

2 different things that have been going on here. One is the aggregate growth rate for the business was much higher. Ziff Davis standalone was 22%, exclusive of IGN and NetShelter. I think that's what you're referring to, Greg.

Gregory Burns - Sidoti & Company, LLC

Yes.

Robert Scott Turicchi

Okay. So on that basis, go ahead. Yes.

Vivek Shah

So right. Our overall growth rate in the first quarter because IGN and AskMen were in for 2 months versus added versus none in 2012 presented at 146%. But I would put that 22%, actually ahead of market, right? So I think the Q1 revenue reports were around 17%...

Robert Scott Turicchi

17%

Vivek Shah

Or 18% range in Q1 of 2013 versus Q1 of 2012. So if you just look at the industry average, we would say we are outperforming the industry average, at the same time of integrating 2 pretty substantial entities within our mix. So I think we were back to sort of an earlier discussion of walking and chewing gum at the same time, able to manage a pretty good growth rate on the core business, and then the ability to integrate or to essentially double the size of the company mid-quarter.

Robert Scott Turicchi

And that growth rate is also really void of any video advertising, which is really updating the rest of the other category. Okay, questions?

Unknown Attendee

Just a quick question. What was the raw dollars of cost here if you think out of IGN on kind of an annualized basis? And how important is the sort of call to rationalization side as opposed to the monetizing the page views better, et cetera?

Vivek Shah

I think we pulled out on an annualized basis, there's 2 different set of costs, which is what I'm searching for here. One set of costs are related to discontinued operations, businesses we decided to get out of. And then other sets of costs are related to the ongoing operations and being more efficient around them. I think on the latter piece of that, you're probably looking about $4 million of cost that we pulled out on an annualized basis. But I think your question, the bigger question, which is and I think I sort of spoke to this earlier which is sort of step 1 in terms of the order of battle is, whether we want to be in and whether we don't want to be in, make those decisions, make those decisions immediately. Then when we're in, is it run the way we would run it? And typically the answer is no. And so put in motion, the restructuring that needs to happen in order for us to get the that, which we did. Now, the focus is 100% on traffic growth, on multiple revenue stream development within the business. And that's the phase that we're in, I think right now. We haven't yet reported on Q2 traffic, which will come in. But we feel good about where we are in terms of the process of creating traffic growth and we feel good about where we are in terms of getting the business rightsized so that as we take revenues up, the unit economics and the operating leverage that we talked about in the Ziff, the originals of that business will continue. The NetShelter side is different. NetShelter really less of a going concern business and more of how do we fuel our tech vertical and find that spot within RTB and display. So that's sort of merged in to the existing Ziff Davis tech business. I put that more in the tuck in category of acquisition versus IGN/AskMen, which is a much more substantial acquisition. Jeff?

Jeffrey Alan Walkenhorst - Copeland Capital Management, LLC

Jeff Walkenhorst with Copeland Capital. Vivek, this is -- this question goes to kind of a line of question earlier. You talked about the headcount and how you're happy with headcount, and you think you can scale the business and generate a lot of flow-through in the bottom line. But as I think about CNET, historically, one of the challenges was, hey you have a fixed number of creative professionals, editorial staff, producers producing a certain number of articles per month. And look, the shelf life of this content, and I'm curious for your response in this, what is the shelf life of this content? How do you monetize -- I mean, do you monetize it for several months or -- and obviously, there's a long tail with online media. But how does that factor into the abilities to generate additional leverage? But I envision this production staff is sort of like hamster wheel where my goodness, okay, here we go. Month start over, you have to do 500 articles, go. Boom! How do you monetize that and kind of keep it going but generate leverage from the same amount of people without bringing on additional staff, does that make sense?

Vivek Shah

It does. And it's scale the function of headcount, right? Can you grow traffic and not grow headcount at -- in a linear sense. We believe, yes, for a couple of reasons. One is, a lot of the content we produce has a long shelf life, right? So product reviews, which products and market for years, some 18 months, some less and some longer. And so the traffic that we can get out [indiscernible] from a certain point of view really had a long period. We're less of a news organization than we are with views and buying guides, which we will continually update, but updating a top 10 printers or updating the best apps for your iPhone, not the same level of effort. We're not re-creating the wheel every time. And so by the way, if you look at some of the top search terms that come into our properties, they're consistent over time. so there's a consistent level of interest and a set the products and a set of questions and query that we're indexed well, too. So I do think unlike a news organization, which everyday you got to win the battle every single day, produce the right set of content to get whatever viewership you're looking for. I think we do have, I think more life in the library. In the fact that we even think in terms of library probably gives you a sense of how we think about that. But even beyond the life of content, I do think that we're continuing to refine, particularly on the newer property, how do we manage quantity and quality of output and make sure we're writing the right stories and we're producing the right videos. I think historically, particularly for CNET of the world, it was -- we're going to produce what we produce and you figure out a way to get audience and revenue. That is not how we go about our operation. We're producing along where the demand is. The market with the signals are there. We see what people are searching, we see what people are sharing, we see what people are interacting with, we then map our content development around there. So as we do more of that better, we're not 100% there, certainly not with the newer property, we're going to create more traffic out of the same set of people. And then, just focusing on productivity, which was never again a more classic editorial organization, you'd have some people producing a one story a day and other people producing 10 stories a day and no one was managing it, right? And so the output's weren't being managed I think as aggressively as we're managing the outputs today. Finally, I think the sources of traffic are changing, right? So at social build, social is being new traffic, we'll get new audience, the stuff get shared that wouldn't typically maybe make it to one of our property and we're beginning to see that. So we have underdeveloped I think our ability to have other websites point to us and drive traffic because we've done so well from a direct and from an SEO point of view. Formatting of content. A lot of content can be put into format that create more traction, more reach circulation. We haven't done as much of -- you've looked at this, now look at this. You've looked at this, now look at this to keep you in the experience. So it's not just us to, hey, to get the next quantum of traffic, you need the same next quantum of editorial folk. So that, I think we've demonstrated, particularly on the tech vertical, we've seen some really good growth rates over time based on really same set of editorial assets and editorial infrastructure. I don't know if that answered...

Jeffrey Alan Walkenhorst - Copeland Capital Management, LLC

That's great. I would just ask as a follow on, what are you doing differently with CNET or Time consistent with the other competitors that may be out there?

Vivek Shah

And I think it's a lot of what I just -- I think I described. I don't think they're -- I mean I can't speak for them. I know how we're organized today and -- I mean, you're seeing it. You're seeing it in the traffic, you're seeing it in our position in the marketplace.

Robert Scott Turicchi

When you have -- we talked about we have 4-legged stool of monetization that spans pretty sturdy. That affects your editorial approach and certain terms and certain content that other people might not pay attention to, we will because we can actually monetize that information better than other people. And so therefore, that creates an opportunity for us to go after certain content types our topics that, quite frankly, our direct competition wouldn't go into.

Just before we go to the last question. It is 5:00, so we'll take one more question from the floor. Management will answer, but then immediately following, there will be a reception on the other side of those black curtains. Management will be available, so feel free to continue to mingle, ask questions for about the next 45 minutes. Go ahead.

Brad Walker

Brad Walker, Sachem Head. I just wanted to ask you, how was your experience when you're working with Great Hill Partners and why did -- how did you go -- what was the process defining j2 as your partner to grow the Ziff Davis platform?

Vivek Shah

So I've been very lucky to have 2 great partners. Great Hill have been terrific in backing us, to take a company out of bankruptcy, backing a CEO, who had not done a private equity-backed buyout before and very supportive and helpful in every step of the process. When this opportunity presented itself, for me, what was very compelling is -- look Great Hill is a private equity business. So for them, an exit is an exit, right? So they're always inclined -- they buy companies, they sell companies. For me, they real key piece, as Steve said, it's advertised. The support we're getting, to build a bigger company, to take this play book and run it in so many other ways is what got me very excited and motivated and why 8,9 months whatever in, they've demonstrated that. And in fact, I would argue, have encouraged me and pushed me to even think bigger. So it's always good to know that you're in an organization that is thinking very big and sees the potential that you do, but even possibly at the next level. And that's why for me, my vote was always that we've got to do this, right? And I just need to look at their track record at j2 to know they've done this. They've done this in their space and they can help us do it in our space. And some Great Hills point of view, I think they wanted to see this team get what it wanted. There's a limit to their checkbook, just that. Just the size of their fund, et cetera. But they were great. So I've been -- we've been very fortunate to have people in our midst who have been really supported. And I think that's very important for a company of our size and at this point in our history, I think that's a critical piece.

Brad Walker

And just given the 2-year hold period for Great Hill, can you just give us the sense of the returns variable again?

Vivek Shah

Can't do that.

Robert Scott Turicchi

That's for them to discuss.

Vivek Shah

Yes.

Robert Scott Turicchi

All right. Thank you very much. We appreciate you joining us both here in New York, as well as on the webcast. As I mentioned, there'll be a reception for us in the next 45 minutes on the other side of the curtain.

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